Trade Openness and Growth: Pursuing Empirical Glasnost

July 1, 2007

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Andreas Billmeier, and Tommaso Nannicini. Trade Openness and Growth: Pursuing Empirical Glasnost, (USA: International Monetary Fund, 2007) accessed October 6, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Studies of the impact of trade openness on growth are based either on cross-country analysis-which lacks transparency-or case studies-which lack statistical rigor. We apply transparent econometric methods drawn from the treatment evaluation literature to make the comparison between treated (i.e., open) and control (i.e., closed) countries explicit while remaining within a unified statistical framework. First, matching estimators highlight the rather far-fetched country comparisons underlying common cross-country results. When appropriately restricting the sample, we confirm a positive and significant effect of openness on growth. Second, we apply synthetic control methods-which account for endogeneity due to unobservable heterogeneity-to countries that liberalized their trade regime and we show that trade liberalization has often had a positive effect on growth.

Subject: Cross country analysis, Education, Expenditure, International trade, Population and demographics, Population growth, Public expenditure review, Trade liberalization

Keywords: A lot of country, Africa, Area dummy, Control country, Country comparison, Country match, Economic growth, Growth, Latin American country, Matching estimators, MCD country, Middle East, Population growth, Public expenditure review, Standard error, State monopoly, Synthetic control, Trade liberalization, Trade openness, Trade policy, Unobservable characteristic, Unobservable country heterogeneity, WP

Publication Details

Pages:

52
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2007/156
Stock No:

WPIEA2007156
ISBN:

9781451867206
ISSN:

1018-5941

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